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India survives global pessimism - Views on News from Equitymaster
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  • Dec 14, 2002

    India survives global pessimism

    The Dow fell by over 2% while the NASDAQ fell by over 4% this week. US investors seem wary of short-term economic numbers, as they do not indicate a robust economic recovery. This coupled with lack of a positive trigger with respect to corporate performance has kept investors away from the bourses. Though the short-term economic numbers look mixed with retail sales figures indicating a healthy trend, long-term economic visibility is hard to come by. Also, the retail figures have been robust due to the holiday season.

    New geo- political concerns and the Iraq impasse have also added to the gloom. For the coming weeks performance of the indices may remain subdued due to lingering concerns over the economy and geo-political issues. Indian ADRs have however outperformed US markets and some of the ADRs have actually gained over the week.

    (Price in US $) 7-Dec-02 14-Dec-02 Change
    Satyam Infoway 2.8 2.5 -9.1%
    ICICI Bank 5.8 7.0 20.9%
    Dr. Reddy's 15.9 16.6 4.2%
    Wipro 33.5 33.4 -0.3%
    VSNL 4.2 4.3 3.1%
    MTNL 4.4 4.4 0.0%
    Infosys 68.5 68.8 0.4%
    Rediff 0.6 0.6 0.0%
    HDFC Bank 12.7 12.7 0.2%
    Satyam 13.3 13.0 -2.4%
    Silverline 1.2 1.2 0.0%

    Indian ADRs have performed better than the US indices. The major gainers over the week being ICICI Bank and VSNL. It increasingly seems that the performance of Indian ADRs is dependent more on the fundamentals as reflected on the Indian bourses rather than the performance of the US markets. The banking stocks have been gaining on the indices during the last week. Good regulatory environment and the news that housing loan incentives are likely to stay in India have lifted sentiment in favour of banking counters. Software ADRs were lacklustre with Satyam falling by more than 2%. As the Indian bourses continue to show buoyancy, the performance of the Indian ADRs may remain good. Any improvement on the US bourses may further add to the optimism.

    Indices 7-Dec-02 14-Dec-02 Change
    FTSE 4,014 3,878 -3.4%
    Nikkei 8,863 8,516 -3.9%
    BSE 3,307 3,344 1.1%
    Hang Seng 9,974 9,728 -2.5%
    NASDAQ 1,422 1,362 -4.2%
    Dow 8,646 8,434 -2.5%
    Dax 3,208 3,077 -4.1%

    Indian bourses gained marginally in a week that saw all major global indices fall reflecting the trend in the dominant US market. The major contributors to this gain were software, PSUs and banking counters. Banks showed buoyancy throughout the week. Going forward the global indices are likely to look for direction from the US markets and this may lead to disappointment. Indian bourses on the other hand, are likely to be largely affected by local factors. Concerns over year-end shuffling of portfolios by FIIs may dampen spirits as the year draws to a close. But 2003 is likely to inject more hope among investors.



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